The narrative is below:
Jack B. Stengel opened his first coffee shop in 2007. At Jack’s Joe Joint (J3) Jack established a company with the goal of
providing customers the best cup of coffee possible in an ecologically friendly fashion. In order to make the best coffee
possible, he decided to personally roast a small volume of beans daily, which allowed him to have very specific control
over the roasting process, aging time, and brewing process for his patrons. J3 also considered the customers’ overall
coffee drinking experience. Jack chose to use custom-made, 100% compostable cups that were specifically designed for
comfort in the hand and to retain the correct temperature, while drawing the aroma of the coffee to the nose of the
drinker. To further the customer appreciation for the coffee, retail staff members are trained to assist the customer in
understanding the coffee, much in the same way that sommeliers teach customers to appreciate wine. Initially, only two
varieties of coffee were offered due to the investment in time and effort necessary to roast so frequently. Although
expensive to produce, the freshness of his coffee allowed Jack to charge a higher price than other local competitors,
which used beans that were often weeks old and had low roast quality. Jack wanted his customers to have the best cup of
coffee of their lives every time they visited his store. Unfortunately, Jack quickly realized that, from his one store, he
could not reach a sufficiently large market to be successful. In mid-2010 he secured a large bank loan in order to expand
operations and J3 opened seven additional stores. The facility expansion necessitated bringing on a large number of new
employees and changes in assigned duties. Jack’s time is no longer primarily spent roasting and serving the coffee.
Instead he has shifted into a more typical manager/ CEO roll, coordinating the activities of stores from purchasing and
hiring, to marketing. All roasting continues to be completed at the original facility by staff specifically hired as
roasters, and the beans are shipped to the individual stores for aging and brewing.
The new stores allowed J3 to reach a broader marketplace and, by the end of 2011, to improve profits through the new
customer base. In the years that followed, Jack’s Joe Joint has had its ups and downs. The company now offers eight
different coffees, each of which is roasted on a daily basis. In order to keep the product fresh and attempt to draw in
new customers, Jack changes the roasts that he offers every six months. This has led to some customer departures as they
become frustrated by constant changes to their accustomed coffee. The roasters are also challenged by the number of
offerings, as each different variety
requires differing roasting techniques. At first, Jack supervised all of the roasting himself and personally tested each
batch prior to releasing it to customers. Now, there are five different people who run the roasting equipment, and Jack
has little time to check the quality of the output. Personnel at the retail stores make their own determinations as to
when a particular roast has aged properly and is suitable for brewing. In the past two years, the number of customer
complaints arising from inconsistent cups of coffee has risen dramatically.
In addition to a higher number of customer complaints, the total cost of the coffee beans used has also been rising. Jack
knows that some of that increase has been the result of an increase in sales volume. It is natural that the quantity of
beans should rise when sales volume rises. Jack knows, however, that the increase in costs is not in line with the
increase in sales. In his opinion, more is being spent on beans than should be. Unfortunately, Jack is unable to
differentiate between the price paid to purchase the beans and the volume of bean usage at the roaster and sales
positions. His belief is that there has been an increase in bean waste with the operational expansion.
In order to attempt to better control product quality, Jack has retained a lot of control over the operations at the
individual stores. He does have managers in each facility, but their roles are limited to monetary management rather than
personnel or operations management. Store managers serve as baristas during the busy first shift. Otherwise, they are only
responsible for daily deposits and ordering supplies for their individual stores. Orders that they create are sent to the
main facility, where Jack confirms them prior to placing the orders with suppliers. Jack often adjusts the orders as he
sees fit. He also retains complete control over store merchandising, hiring, and scheduling. Store manager turnover has
been higher than the industry average, with many departing staff complaining about the lack of autonomy. Jack knows that
this turnover is costly in terms of hiring and training time, but it is also costly in terms of client retention.
Customers like consistency in product and in staff. They appreciate being recognized and receiving personal attention when
they arrive in the store. When staff turnover is high, it becomes less likely that customers will receive this personal
attention. Between the inconsistency in coffee quality and the manager losses, Jack is certain that sales are being lost
and is concerned that the original goal of the company has been compromised.
The recent economic depression has caused further problems for J3. All of the beans used by the company are “shade grown,”
which means that they are grown using more environmentally sustainable processes. Unfortunately, these processes are more
costly to utilize, resulting in a more expensive raw material
for J3. The prices that Jack is paying for his unroasted beans have been steadily rising, but he knows that his customers
will not tolerate significant increases in the cost per cup. In addition, rising fuel costs have caused an increase in the
cost of delivering the roasted beans to each of his retail stores. Jack is not certain as to how to deal with these
increases in costs when he does not believe that he can raise the selling price without sacrificing sales volume.
Jack believes in his business concept. He is certain that the product and service J3 offers is unique enough to build and
maintain a loyal customer base. More importantly, he believes that the customer base can be of sufficient size to make a
profitable enterprise. Unfortunately, recent operational results have not been good. With each passing quarter, the
company seems to struggle more, and the accountants are now reporting that the cash flow predictions for the coming year
are insufficient to cover costs. Jack suspects that as the company expanded, it lost its way. He is also concerned that
his emotional investment in the enterprise is impacting his ability to make good decisions.
Therefore, he believes that a review of the operation by an outside party will help to identify specific improvements that
may be made. That’s where your team comes in.
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